The Shapeshifter: Ken Rees of Elevate and Think Finance

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Ken Rees is the CEO of payday lender Elevate and the former CEO of Think Finance, the payday lending company that Elevate spun out of in 2014. Rees and Elevate offer installment loans which they claim are a better alternative than payday loans. This claim does not hold up, however, in light of Elevate’s extremely high interest rates of up to 378.95%. Rees and Elevate have even acknowledged the high interest rates on the loans they provide, with Rees saying that they are not offering “rock-bottom” rates and the fine print of their solicitations acknowledging that the loans they provide are an “expensive form of credit.” With their astronomical interest rates, Elevate raked in over a half billion dollars in 2013 alone. And they showered over $210,000 of that cash on federal lobbyists to attempt to hinder regulations of the payday loan industry.

Over the years, Rees has shown himself to be a shapeshifter when it comes finding ways to evade state regulations that ban or limit payday loans. While at Think Finance he used the services of a rogue Philadelphia bank in a rent-a-bank scheme designed to evade regulations to provide illegal payday loans. When the bank they used to do this was shut down by federal regulators, Rees came up with a different solution. He partnered with Native American tribes to get around state regulations by claiming that they were subject to tribal law, rather than state law. His company has made hundreds of millions of dollars under this “rent-a-tribe” scheme providing payday loans in violation of state laws and regulations. This may soon come to an end though, as Pennsylvania’s Attorney General recently filed a lawsuit against Rees, Elevate, and Think Finance claiming that their use of Native American tribes is a violation of racketeering, consumer protections and lending laws by deliberating attempting to evade state regulations.

Rees has opposed regulations of payday loans including interest rate caps and limits on the amount a person can borrow. He has called opponents of payday loans “dangerous and patronizing” and of operating with a “moral superiority.” He even claimed that traditional checking accounts were predatory compared to payday loans.

Over the last few years, Rees has contributed at least $109,400 to the campaigns of powerful politicians and special interest PACs.

The Details:

Ken Rees Is the CEO of Elevate and Former CEO of Think Finance

Ken Rees Is The CEO Of Elevate And Former CEO Of Think Finance. “A financial services industry veteran, Ken Rees has led Elevate since its inception in 2014. Ken previously served as CEO for Think Finance for nine years and was the founder and CEO of CashWorks, a non-bank financial technology company (acquired by GE in 2004). Earlier in his career, he ran CSC Index’s west coast financial services consulting practice. Ken graduated from Reed College with a degree in mathematics and earned his MBA in Finance and Statistics from the University of Chicago. In 2012 Ken was selected as the Entrepreneur of the Year by Ernst and Young for the Southwest Area North region. When he’s not working (which is rare) he reads voraciously, listens to obscure music, and is a member of the company’s cycling team (often pointing out that he’s not the slowest member). [Elevate Website]

Elevate Spun Out Of Think Finance In 2014. “Think Finance , a producer of online financial products, is restructuring its business and spinning off a new independent company named Elevate . According to the firm, Elevate will own Think Finance’s portfolio of products that include RISE , Elastic and Sunny while Think Finance will focus on providing analytics and tech services to third-party lenders. Ken Reese, former CEO of Think Finance, will lead Elevate. And, Martin Wong, former chief integrity officer at Think Finance, has been appointed the firm’s CEO. Think Finance is backed by Sequoia Capital and Technology Crossover Ventures.” [peHUB, 5/2/14]

Think Finance Entered Into Agreements With Two Other Tribes And Spun Off Its Consumer Lending Into A Different Company Called Elevate, Of Which Ken Rees Is CEO. “After entering into its arrangement with the Chippewa Cree, Think Finance also made deals with two other tribes: the Otoe-Missouria in Oklahoma, which run Great Plains Lending, and the Tunica-Biloxi in Louisiana, which run MobiLoan. Think Finance also sells its technology to banks that create and issue consumer lending products. And in 2014, it spun off its own consumer lending products into a separate company, Elevate, of which Ken Rees is the CEO. Think Finance’s former chief integrity officer, Martin Wong, is Think Finance’s current CEO.” [Huffington Post, 6/29/15]

Elevate and Think Finance Are Payday Lenders That Make Loans With APR’s up to 378.95% While Playing Them Off As “Installment Loans” That Are a Better Alternative Than Payday Loans…

Think Finance/Plain Green Charged Interest Rates Up To 378.95% And Allowed People To Take Out Loans Up To $3,000. “Plain Green’s interest rates top out at 378.95 percent, and the company gives out loans for as much as $3,000 — an amount that far exceeds the $500 maximum set by most states. While some states also limit how often person can borrow from a traditional payday lender in a set timeframe, some Plain Green borrowers have been able to borrow more frequently than their state regulation would allow. Plain Green notes it does not allow borrowers to take out more than one loan at a time.” [Huffington Post, 6/29/15]

Ken Rees’ Elevate Launched RISE, An Installment Loan That Markets Itself As A “Kinder, Gentler Alternative To Payday Loans” Using A TV Commercial Showing Rocky Balboa. “The black-and-white commercial follows a sweaty Sylvester Stallone on his iconic training run through Philadelphia as Rocky, America’s favorite underdog. “Every day is a fight to beat the odds, to get ahead of what life throws at you,” intones a deep-voiced announcer as the Rocky theme music plays and Stallone, playing the boxer in the 1979 movie Rocky II, jabs the air with his fist. “Now there’s a new way to borrow the money you need fast — without having to use a payday loan.” It’s an ad for RISE, an online installment loan that markets itself as a kinder, gentler alternative to payday loans. Consumer advocates say borrowers shouldn’t necessarily buy the hype, warning that an unaffordable installment loan is just as dangerous as any other short-term loan. But the company’s top executive says the loans are designed to help people with limited or subprime credit histories. “We licensed the soundtrack of Rocky because we’re trying to highlight the idea of a financial comeback for our customers,” said Ken Rees, chief executive officer of Elevate, the Fort Worth-based company that launched RISE a year and a half ago.” [Fort Worth Star Telegram, 3/13/15]

While Borrowers Have Longer To Repay RISE Installment Loans, They Still Have An Annual Interest Rate Of 324%. “Borrowers have longer to repay RISE installment loans, which typically range from $500 to $5,000. But they can still be very costly. A $1,000 RISE loan in Missouri, for example, could wind up costing more than $3,100 to repay in 24 biweekly installments of $132.56, according to a standard payment schedule posted on RISE’s website. That’s an annual interest rate of 324 percent.” [Fort Worth Star Telegram, 3/13/15]

Consumerist, A Consumer Affairs Blog, Called RISE Loans A “Payday Wolf In Rocky’s Sweatshirt.” “Consumerist, a consumer affairs blog published by a nonprofit subsidiary of Consumer Reports, was more blunt, describing RISE as a “payday wolf in Rocky’s sweatshirt.” [Fort Worth Star Telegram, 3/13/15]

A 67-Year-Old Retired Woman Took Out A Total Of $3,400 In Loans From Think Finance/Plain Green And Ended Up Paying Over $6,000 In Interest. “Some borrowers say they have fared poorly in their dealings with Think Finance and Plain Green. Clarnetta Rice, a 67-year-old retired customer service representative for the Philadelphia health department, illustrates the problems borrowers commonly face based on the terms of Plain Green loans. Payday lending is illegal under Pennsylvania law. But in April 2012, Rice went online and borrowed $800 from Plain Green in order to get her car fixed. In the three months it took her to pay that loan back, she racked up $1,383.74 in interest. Still, in August 2012, she borrowed another $1,000 from Plain Green, and in September 2013 another $1,600. Paying her last loan off cost her $2,834 in interest over just four months. All told, Rice borrowed $3,400 from Plain Green and paid $6,197.58 in interest. To cover that amount, she took out yet another loan from another online payday lender. “As I was keying in to get the money to get that car fixed, I knew I was wrong,” Rice told HuffPost, “but I had no other choice.” [Huffington Post, 6/29/15]

…Though Both Rees and Elevate Admit They Are Offering High Rates

RISE Puts On The Fine Print In The Back Of Its Marketing Letter That “This Is An Expensive Form Of Credit” But The Message Is Far “Less Prominent Than The Cheerful, Here-To-Help Sentiment On The Front OF The Letter.” “For example, at the very bottom of the fine print on the back of its recent letter for Rise, the company says that “this is an expensive form of credit” and “this service is not intended to provide a solution for longer-term credit or other financial needs.” “Customers with credit difficulties should seek credit counseling,” it says. That message, however, is considerably less prominent than the cheerful, here-to-help sentiment on the front of the letter.” [Los Angeles Times, 2/10/14]

Lucrative Lending: Elevate’s Payday Loans Brought in More Than Half a Billion in Revenue in 2013…

In 2013, Think Finance Brought In More Than $500 Million In Revenues. “A Think Finance press release in 2013 stated the company had more than $500 million in revenues – up from $100 million in 2010 – and had provided more than $3.5 billion in loans to 1.5 million consumers in the U.S. and internationally.” [Fox43, 11/13/14]

In Just A Year And A Half, RISE Had Issued Almost A Half Billion In Loans To Over $168,000 People In 15 States. “But the company’s top executive says the loans are designed to help people with limited or subprime credit histories. “We licensed the soundtrack of Rocky because we’re trying to highlight the idea of a financial comeback for our customers,” said Ken Rees, chief executive officer of Elevate, the Fort Worth-based company that launched RISE a year and a half ago.”Now available in 15 states — including Missouri, California and Texas — RISE has issued almost half a billion dollars in loans to more than 168,000 customers. The company expects to expand its services to Kansas and Virginia later this year.” [Fort Worth Star Telegram, 3/13/15]

…and They Spent $210,000 in Federal Lobbying in 2014

In 2014, Elevate Spent $210,000 To Lobby The Federal Government On Financial Legislation And Online Lending Issues. “Elevate spent $210,000 last year to lobby the federal government on financial legislation and online lending issues, according to Senate financial disclosure records.” [Fort Worth Star Telegram, 3/13/15]

Rees Used the Rent-a-bank Model to Make Illegal Payday Loans Until the Bank They Sued Was Shut Down by the Feds…

Rees Used The “Rent-A-Bank” Model To Get Around State Payday Loan Regulations With Think Cash. “With Think Cash, Rees had found a clever way around these regulations: The loans were passed through a nationally chartered bank, thereby exempting them from state banking laws. This “rent-a-bank” model had been popular among online payday lenders since at least the late 1990s. But by 2010, various federal regulators had all but shut down the arrangement. Rees needed a new way to keep his business alive.” [Huffington Post, 6/29/15]

Prior To Establishing Tribal Partnerships, Rees And Think Finance Used The Cover Of A Rogue Bank In Philadelphia In A Rent-A-Bank Scheme To Make Illegal Payday Loans Until The Federal Government Shut Down The Bank. “According to the lawsuit, before establishing these tribal partnerships, the company allegedly used the cover of a rogue bank based in Center City Philadelphia, in what is commonly referred to as a “rent-a-bank” scheme, until the federal government shut down the bank.” [Fox43, 11/13/14]

After Regulators Shut Down The “Rent-A-Bank” Model, Rees Worked With Native American Tribes To Get Around State Regulations In A New Model Called “Rent-A-Tribe.” “Rees needed a new way to keep his business alive. The solution he found was relatively straightforward: He’d work with Native American tribes, which are exempt from state regulations. Think Cash renamed itself Think Finance, and in early March 2011 sent a letter to the Chippewa Cree Tribe proposing that they create a joint lending venture. Such arrangements between online payday loan companies and Native American tribes have become increasingly popular. Indeed, as the rent-a-bank model has waned in the face of government regulations, the “rent-a-tribe” model has taken off in recent years. Today, a quarter of the $4.1 billion the online payday loan industry takes in each year goes to 30 or so lenders based on reservations, according to Al Jazeera America. [Huffington Post, 6/29/15]

Rees And Think Finance Partnered With The Chippewa Cree Tribe In Remote Montana Creating An Online Payday Lending Company Called Plain Green. “The Chippewa Cree, a small tribe with about 6,000 members in a remote part of Montana near the Canadian border, made an ideal partner for Think Finance. Jobs on the reservation are scarce, and unemployment there hovers between 60 and 70 percent. The arrangement with Think Finance offered a way to generate millions of dollars for the tribe and spur wider economic development on the reservation. Think Finance agreed to build a call center to serve the payday lending business, according to the agreement between the company and the tribe, and the Chippewa Cree planned to use revenue from the venture to fund social welfare programs and help build a new tribal health center. According to one tribal leader with direct knowledge of the deal, Think Finance also made it clear to the Chippewa Cree that if the tribe didn’t accept Think Finance’s terms, the company would be perfectly happy to find another tribe that would. Within two weeks of receiving Think Finance’s letter, the Chippewa Cree, who had tried for a year to run their own lending business, agreed to the arrangement. The tribe partnered with Think Finance and renamed its lending company Plain Green. The tribe would own 51 percent of the company, and Think Finance would own 49 percent.” [Huffington Post, 6/29/15]

Think Finance Gave The Tribe Only 4.5%-5.5% Of The Revenue Generated From The Arrangement, While Think Finance Took In An Estimated $500-$700 Million. The tribe has received an estimated $28 million to $32 million from Plain Green since it was created, according to documents obtained by HuffPost that were filed in tribal court as part of a case between the tribe’s former chairman and other tribal leaders that involves the agreement with Think Finance. A March 11, 2011, agreement between the tribe and Think Finance submitted as an exhibit in that case says that Plain Green had received 4.5 to 5.5 percent of the revenues collected by the operation, meaning Think Finance and other third parties received an estimated $500 million to $700 million. [Huffington Post, 6/29/15]

Think Finance/Plain Green’s Loans Are Made Online, Through The Indian Reservations, And Then End Up Being Owned By A Cayman Islands Servicing Company. “The Think Finance-Plain Green business model is representative of these growing online payday lending operations. The loans, and millions of dollars of fees paid to Think Finance, pass through Plain Green and circumvent state regulations, while the real work of running the lending business happens elsewhere. Thanks to Think Finance’s online lending platform, Plain Green is able to make loans all over the country. Eventually, the loans end up owned by a Cayman Islands servicing company. And Plain Green, which cites the Chippewa Cree’s sovereignty in its lending agreement with customers, says that state and federal regulators have no legal standing to complain.” [Huffington Post, 6/29/15]

The Indian Reservations Would Sign Off On The Loans Approved By Think Finance, But Had “No Meaningful Role In The Lending Process.” “A former Plain Green executive and member of the Chippewa Cree tribe who requested anonymity due to fears of retribution told HuffPost that at the end of each day, a Plain Green officer signed off on all the loans approved by Think Finance’s software. That meant that technically, the loans were made by Plain Green, despite the fact that the tribal company had no meaningful role in the lending process.” [Huffington Post, 6/29/15]

Payday Lending Expert: “The Very Purpose Of An Online Lender Affiliating With A Tribe Is Specifically And Expressly So They Can Lend In Violation Of State Laws.” “While lending companies and their investors rake in money, however, the situation is more precarious for the more than 3 million Americans who take out online payday loans each year. “The very purpose of an online lender affiliating with a tribe is specifically and expressly so that they can lend in violation of state laws,” Ellen Harnick, a payday lending expert at the Center For Responsible Lending, told HuffPost. And it’s the poorest Americans — the ones who need quick cash to address the most pressing issues in their lives — who are most at risk.” [Huffington Post, 6/29/15]

…and Elevate, Think Finance, and Ken Rees Were Sued by Pennsylvania’s Attorney General for This Practice Which Allegedly Violates the State’s Racketeering, Consumer Protection and Lending Laws by Deliberately Attempting to Evade State Regulation

On May 13, 2015, Pennsylvania’s Attorney General Filed A Lawsuit Against Think Finance And Ken Rees Alleging They Violated The State’s Racketeering, Consumer Protection, And Lending Laws. “In November, Pennsylvania’s attorney general filed a lawsuit against Think Finance and Ken Rees, alleging they violated the state’s racketeering, consumer protection and lending laws. And on May 13, two Vermont women sued Plain Green in federal court, alleging that the company is violating federal trade and consumer protection laws. “Plain Green and the Tribe intend to evaluate the complaint and determine the appropriate response,” said Rosette, Plain Green’s CEO.” [Huffington Post, 6/29/15]

Pennsylvania Argues That Think Finance’s Arrangements With Native American Tribes Amount To A Conspiracy To Avoid State Law And Also Misrepresent Who Is Actually Providing The Loans. “Pennsylvania argues that Think Finance’s arrangements with the Cree, the Otoe-Missouria and Tunica-Biloxi amount to a conspiracy to evade state law. The state’s complaint alleges that Think Finance, “as an alternative to making the loans in their own name, structured, participated in, and operated this scheme in which they act as providers of contracted ‘services’ to the bank and the tribes,” deliberately misrepresenting who was providing the loans. That, the state argues, means Think Finance has violated Pennsylvania’s racketeering laws.” [Huffington Post, 6/29/15]

Rees Opposed Rate Caps and Payday Loan Limits

Rees Opposed Limits On Loan Payments As A Percentage Of A Borrowers Income As Well As Rate Caps. Ken Rees wrote in an op-ed, “Many of the current prescriptions for change merely constrict innovation and reduce access to credit. Affordability limits, for instance, while well-intentioned, are unrealistic based on most borrowers’ needs. If loan payments are capped at 5% of income (as a recent Pew study recommended), the average American would be limited to $60 in loan payments per biweekly pay period, (based on a $31,000 annual income, as noted in the Pew report). This would severely limit loan amounts and paradoxically cause lenders to extend the terms of the loans to absurd lengths. Arbitrary rate caps also only serve to eliminate access to credit. While prohibition has a certain moral appeal, the reality is that for the millions of Americans facing unexpected bills, the most expensive credit is no credit at all.” [Ken Rees Op-Ed, American Banker, 2/27/14]

Ken Rees Said Opponents Of Payday Loans Have A “Dangerous And Patronizing Point Of View.” Ken Rees wrote in an op-ed, “Most opponents of short-term credit products like payday loans believe that eliminating options for consumers is the right thing to do because they legitimately believe consumers can’t be trusted to make their own financial decisions. That is a dangerous and patronizing point of view.” [Ken Rees Op Ed, Fox News, 3/15/12]

Rees: “Under-Banked Americans Don’t Want Charity And They Certainly Don’t Want Moral Superiority.” “Under-banked Americans don’t want charity and they certainly don’t want moral superiority; they just want financial products that meet their needs for convenience, speed, and transparency of pricing. And they are smart enough to determine the best financial option for their unique situation.” [Ken Rees Op-Ed, Fox News, 3/15/12]

Rees Called Traditional Checking Accounts Predatory

Rees: People Use Payday Loans Because “A Traditional Checking Account For Millions Of Americans Is A Predatory Product.” “The reason consumers choose alternative financial services products is not because they’re too dumb to figure out that there’s a high APR associated with those products, but because compared to the alternatives the’re a lot cheaper,” Rees asserts. “A traditional checking account for millions of Americans is a predatory product,” he says referring to overdraft fees that for some come to more than $1,500 a year. “Traditional bank products are great for people who have significant balances and don’t run their checking account near the edge, don’t live paycheck to paycheck,” he observes. “But for the expanding percent of Americans who are squeezed and don’t have significant reserves, traditional checking accounts can be a bad solution. That’s why people have had to go outside the banking system.” [Banktech.com, 10/12/10]

Rees Said Payday Loan Consumers Were “The New Middle Class”

Rees Called RISE’S Customer Base “The New Middle Class” With FICO Scores Between 550-650 And Fairly Low Savings. “Rees said RISE offered credit for borrowers in need of emergency cash who weren’t being served by the mainstream banking system. He describes RISE’s customer base as the new middle class; they often have FICO credit scores between 650 and 550 and fairly low savings. They skew more female than male, and most have at least some college education, Rees said. More than half are 25 to 44 years old.” [Fort Worth Star Telegram, 3/13/15]

Over the Years, Rees Has Contributed at Least $109,400 to the Campaigns of Powerful Politicians and Special Interest PACs.

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